UNIT PLAN UBFF3243 International Finance

UNIVERSITI TUNKU ABDUL RAHMAN (UTAR) FACULTY OF BUSINESS AND FINANCE Bachelor of Commerce (Hons) Accounting Bachelor of Business Administration (Hons) Banking and Finance Bachelor Of Economics (Hons) Financial Economics
Academic Year: 2011/2012 Trimester: May 2011

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Unit Code & Unit Title: Course of Study: Year of Study: Trimester Year Credit Hour: Lecturing hours and Tutoring hours Lecturer: Tutors:

UBFF3243 INTERNATIONAL FINANCE Bachelor of Commerce (Hons) Accounting [FBF] Bachelor of Business Administration (Hons) Banking and Finance [FBF] Bachelor Of Economics (Hons) Financial Economics [FBF] Year Three, Trimester Three May 2011 3 credit hours 2 hours lecture per week for the duration of 14 weeks 1.5 hours tutorial per week for the duration of 14 weeks Mr. Lim Tze Jian limtj@utar.edu.my [FBF] Mr. Chong Tun Pin chongtp@utar.edu.my [FBF] Dr Chue Wen Yeen chuewy@utar.edu.my [FBF] Ms Kuah Yoke Chin kuahyc@utar.edu.my [FBF] Mr. Lim Tze Jian limtj@utar.edu.my [FBF] Mr William Choo Keng Soon chooks@utar.edu.my [FBF] Cik Zuriawati binti Zakaria zuriawatiz@utar.edu.my [FBF] Mr. Chong Tun Pin Lectures and Tutorials This unit offers the field of study that focuses on business activities that cross national boundaries. It includes exports and imports as well as foreign direct investment (FDI) and raising finance in foreign capital markets. Besides that, this unit provides basic understanding on how multinational enterprises (MNEs) use various hedging strategies to reduce exchange rate risk and formulate global business strategies to deal with intensified competition globally. The aim is to provide a panorama of the most
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Moderator

10 Mode of . delivery 11 Objectives: .

UNIT PLAN UBFF3243 International Finance

important activities in international business and to offer a framework of working from managerial perspective. 12 Learning . Outcomes: 1. To be able to analyse or evaluate the different aspects relating to an MNC. 2. To be able to differentiate various exchange rate regimes, and have some ability to comment on and assess the policies implemented by governments that relate to international finance. 3. To be able to analyse the impact of the various events taking place in the international scene. 4. To gain an understanding of the foreign exchange market; and be able to analyse the factors affecting exchange rates. 5. To be able to apply various international parity theories to specific situations. 6. To be able to apply various hedging techniques and choose which is the best one for the given situation. 7. To be able to make use of various methods of financing international trade and to choose between them. 13 Reading List: Main Text Books: . 1. Moffett, M.H., Stonehill, A.I. and Eiteman, D.K., 2009, Fundamentals of Multinational Finance (3rd Ed.), Boston, Pearson Education: Prentice Hall. 2. Madura, J., 2010, International Corporate Finance (10th Ed.), Ohio, Cengage Learning: South-Western. Supplementary Reading: 3. Eun, C., Resnick, B.G., Ng, K.K., Tee, P.L. and Maran, M., 2011, International Financial Management (to be released), McGraw-Hill Irwin. 4. Eun, C. and Resnick, B.G., 2007, International Financial Management (4th Ed.), New York, McGraw-Hill Irwin. 5. Crum, R.L., Brigham, E.F. and Houston J.F., 2005, Fundamentals of International Finance, Florida, Thomson: South-Western. 6. Homaifar, G.A., 2004, Managing Global Financial and Foreign Exchange Rate Risk, New Jersey, John Wiley & Sons. 7. Melvin, M., 2004, International Money and Finance (7th Ed.), Boston, Pearson: Addison Wesley. 8. Moosa, I.A., 2004, International Finance: An Analytical Approach (2nd Ed.), Sydney, McGraw-Hill Irwin. 9. Shapiro, A.C., 2005, Foundations of Multinational Financial Management (5th Ed.), New Jersey, John Wiley & Sons.

UNIT PLAN UBFF3243 International Finance

14 Method of . Assessment:

METHOD OF ASSESSMENT Generally, the method of assessment is as follows: Marks Allocated 100 marks 100 marks Weightage of Contribution 40% 60% 100%

Coursework Final Examination Total percentage assessed

The components of the above are as follows: Coursework (40% of Total percentage assessed) Components of Marks Coursework Allocated a. Mid-Term Test 50 marks b. Group Assignment 40 marks c. Group Presentation 10 marks Total 100 marks Weightage of Contribution 20% 16% 4% 40%

Component a: Mid-Term Test This test consists of 20 multiple-choice questions and 3 structured questions. It will be held in WEEK 8 and will cover Topic 1 to Topic 6 Component b: Assignment (Group) Students are advised to strictly comply with all requirements stated for the assignment. Students are required to group themselves into a group of at least FOUR or a maximum of FIVE members and register their grouping with respective tutor by WEEK 2. (Please refer to Assignment Question) Standard format of assignment should apply in this written assignment such as the font size (12 Arial), 1.5 spacing, one-inch margins etc. The deadline to submit this assignment is set at 10:00A.M. SHARP ON 1ST AUGUST 2011 (MONDAY OF WEEK 10). All assignment groups are required to submit their assignment work to their tutors before the deadline. (please read Late Submission Penalty Clause below) Any assignment groups that are caught plagiarising or letting part or whole of their work to be plagiarised will be penalised, with all the groups involved being penalised with a ZERO (0) mark for the assignment. In addition, the students involved could face disciplinary action from the University. (please read Plagiarism clause below) Late Submission Penalty Clause Deadline for submission of assessment item(s) is to be strictly adhered to. No extension of time will be allowed except in extenuating circumstances, e.g. medical reasons. Students who wish to apply for extension of time for submission of assessment item(s) after the due date shall put in writing the request together with validated documentary evidence to support the application to his/her class tutor. The lead lecturer may consider and grant
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UNIT PLAN UBFF3243 International Finance

such extension of due date for the assessment item(s) based on the tutor's recommendation. Any assessment item required by the Coursework Assessment which is submitted after the due date, without an approved extension, will be penalised. A penalty of 10% (from awarded marks) for each calendar day of delay from the specified deadline will apply. No assignment submitted FIVE (5) calendar days after the due date will be accepted and hence the assignment will being penalised with a ZERO (0) mark. Component c: Presentation (Group) Students need to present their tutorial answers in groups. Tutors will allocate the sequence of the groups to present. Students should present their own answers and not answers copied from the seniors and other sources. Presentations using copied answers will be given a mark of Zero (0). This is to facilitate the students understanding of the subject by trying the questions on their own. Final Examination (60% of Total percentage assessed) Components of Final Marks Weightage of Examination Contribution Section A: Compulsory 40 marks 24% question Section B: 3 questions of 60 marks 36% 30 marks each. Choose 2 questions. Total 100 marks 60%

Passing Mark Students who are from the intake before January 2010: Students must achieve at least 40 total percentage assessed in order to Pass this unit (Grade D). Students who are from the intake starting January 2010 onwards: Students must achieve at least 50 total percentage assessed in order to Pass this unit (Grade C).

UNIT PLAN UBFF3243 International Finance

15 Remarks .

INDEPENDENT LEARNING As a third year university student, you are expected to undertake independent learning and reading up on each topic in addition to attending lectures and tutorials each week. To assist you to do this, a schedule of recommended reading has been prepared. International Finance is a dynamic subject and you are also expected to keep up-to-date with current events by reading the financial pages of the newspapers and financial magazines, such as www.imf.org, www.adb.org, www.ft.com www.bnm.gov.my, biz.thestar.com.my, www.nst.com.my, , www.awsj.com, www.theedgedaily.com, etc.

ACADEMIC REGULATIONS Plagiarism Plagiarism is defined as the submission or presentation of work, in any form, which is not one's own, without acknowledgment of the sources. If a student obtains information or ideas from an outside source, that source must be acknowledged. Another rule to follow is that any direct quotation must be placed in quotation marks and the source immediately cited. Plagiarism is also defined as copy of all or part of the work of another student(s) of current or previous batch of this University or another higher learning institution. The University's degree and other academic awards are given in recognition of the candidate's personal achievement. Plagiarism is therefore considered as an act of academic fraudulence and as an offence against University discipline. Intellectual Property Copyright must be seriously protected. The University takes a strong stand against any illegal photocopying of textbooks and any other materials by students. Students are forewarned of the consequences and the penalty that may be meted out if they are "caught in the act". Mode of Referencing Students are advised to incorporate proper academic modes of referencing. The normally acceptable mode of academic referencing is the American Psychological Association (APA) system.

UNIT PLAN UBFF3243 International Finance

TEACHING PLAN - WEEKLY SCHEDULE

Week Week 1 (30th May 2011-5th Jun 2011) Lecture Topic Topic 1: Multinational Financial Goals Multinational Financial Management Globalisation: Transitions from Domestic Phase to International Phase to Multinational Phase Shareholder Wealth and Corporate Wealth Maximization Tutorial Topic Tutorial 1 Description of Assignment. Clarify what are required from students for this unit. Assignment/Test Group Assignment Date given: Week 1 Due date: 10:00a.m., 1st August 2011 (Monday of Week 10) Description of Assignment Midterm Test Week 8: Day and time to be confirmed Week 2 (6th Jun 2011-12th Jun 2011) Topic 2: The Balance of Payments Typical BOP Transactions Fundamentals of BOP Accounting BOP Flow Statement Current Account and Capital Account Direct Investment and Portfolio Investment BOP in Total: Surplus and Deficit Capital Mobility Factors affecting the BOP position Correcting a Balance of trade deficit Tutorial 2 (Topic 1) Minimum 4 questions to be answered and will be discussed in tutorial class. Moffett 3rd Ed. (Chapter 4) Moffett 2nd Ed. (Chapter 3) Madura (Chapter 2) Reference Moffett 3rd Ed. (Chapter 1 & 2) Moffett 2nd Ed. (Chapter 1) Madura (Chapter 1)

UNIT PLAN UBFF3243 International Finance Week 3 (13th Jun 2011-19th Jun 2011) Topic 3: International Monetary System History of the International Monetary System Exchange Rate Systems Fixed exchange rate, Freely and Managed Floating exchange rate, Pegged exchange rate Currency Boards Dollarization The Birth of Euro Currency Sterilized and Nonsterilized Interventions Government Intervention on Exchange Rate Topic 4: The Foreign Exchange Market Foreign Exchange Market Market Participants Interbank and Client Markets Foreign Exchange Rate & Quotations Bid and Ask Rates Cross Rates Intermarket Arbitrage Spot and Forward Rates, Premiums and Discounts Tutorial 3 (Topic2) Minimum 4 questions to be answered and will be discussed in tutorial class. Moffett 3rd Ed. (Chapter 3) Moffett 2nd Ed. (Chapter 2) Madura (Chapter 6)

Week 4 (20th Jun 2011-26th Jun 2011)

Tutorial 4 (Topic 3) Minimum 4 questions to be answered and will be discussed in tutorial class.

Moffett 3rd Ed. (Chapter 5) Moffett 2nd Ed. (Chapter 6) Madura (Chapter 3)

UNIT PLAN UBFF3243 International Finance Week 5 (27th Jun 2011-3rd Jul 2011) Topic 5: International Parity Conditions Prices and exchange rates Purchasing Power Parity (PPP) Fisher Effect International Fisher Effect Interest Rate Parity (IRP) Covered and Uncovered Interest Arbitrage Locational Arbitrage Topic 6: Exchange Rate Determination Factor affecting supply and demand for foreign exchange rates Expectation Speculation in foreign exchange market Exchange Rate Forecasting Tutorial 5 (Topic 4) Minimum 4 questions to be answered and will be discussed in tutorial class. Moffett 3rd Ed. (Chapter 6) Moffett 2nd Ed. (Chapter 4) Madura (Chapter 7 & 8)

Week 6 (4th Jul 2011-10th Jul 2011)

Tutorial 6 (Topic 5) Minimum 4 questions to be answered and will be discussed in tutorial class.

Madura (Chapter 4 & 9)

Week 7 (11th Jul 2011-17th Jul 2011)

Topic 7: Foreign Currency Derivatives Foreign Currency Futures Foreign Currency Options Net Payoff for Options Buyer or Seller Pure Spot Market Speculation Forward Market Speculation Option Market Speculation

Tutorial 7 (Topic 6) Minimum 4 questions to be answered and will be discussed in tutorial class.

Moffett 3rd Ed. (Chapter 8) Moffett 2nd Ed. (Chapter 7)

UNIT PLAN UBFF3243 International Finance Week 8 (18th Jul 2011-24th Jul 2011) Topic 8: Measuring Exposure: Types of Exposure: Transaction, Economic and Translation Why Hedge? Tutorial 8 (Topic 7) Minimum 4 questions to be answered and will be discussed in tutorial class. Mid-Term Test Topic 1 to 6 20 multiple-choice questions and 3 structured questions Moffett 3rd Ed. (Chapter 9, 10 & 11) Moffett 2nd Ed. (Chapter 8, 9 & 10) Madura (Chapter 10)

Week 9 (25th Jul 2011-31st Jul 2011)

Topic 9: Managing Exposure Techniques to eliminate Transaction Exposure: Futures Hedge, Forward Hedge, Money Market Hedge, Option Hedge, Leading and Lagging, Cross-Hedging, Exposure Netting Comparison of Hedging Techniques Limitations of Hedging Techniques to reduce Economic Exposure: Selecting Low Cost Production Site, Diversification of Markets, Flexible Sourcing Policy

Tutorial 9 (Topic 8) Minimum 4 questions to be answered and will be discussed in tutorial class.

Moffett 3rd Ed. (Chapter 9, 10 & 11) Moffett (Chapter 8, 9 & 10) Madura (Chapter 11 & 12)

UNIT PLAN UBFF3243 International Finance Week 10 (1st Aug 2011-7th Aug 2011) Topic 10: Currency and Interest Rate Swap Management of Interest Rate Risk Interest Rate Swap Currency Swap Unwinding Currency Swap Cross-Currency Interest Rate Swap Tutorial 10 (Topic 9) Minimum 4 questions to be answered and will be discussed in tutorial class. Assignment Due Assignment should be submitted before 10:00a.m., 1st August 2011 (Monday) Moffett 3rd Ed. (Chapter 15) Moffett 2nd Ed. (Chapter 14)

Week 11 (8th Aug 2011-14th Aug 2011)

Topic 11: Multinational Cost of Capital and Availability of Capital Weighted Average cost of Capital Country differences in cost of debt and equity Capital Asset Pricing Model under cross-listing Using the cost of capital to assess foreign projects MNE's Capital Structure Decision Interaction between subsidiary and parent financing decisions Target capital structure: local versus global Sources of shortterm financing Effective Financing Rate

Tutorial 11 (Topic 10) Minimum 4 questions to be answered and will be discussed in tutorial class.

Madura (Chapter 17 & 20)

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UNIT PLAN UBFF3243 International Finance Week 12 (15th Aug 2011-21st Aug 2011) Topic 12: Foreign Direct Investment Motives for FDI Comparing Benefits of FDI Among Countries International Diversification Benefits Government Incentives and Barriers How to invest abroad? Tutorial 12 (Topic 11) Minimum 4 questions to be answered and will be discussed in tutorial class. Moffett 3rd Ed. (Chapter 17) Moffett 2nd Ed. (Chapter 16) Madura (Chapter 13)

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UNIT PLAN UBFF3243 International Finance

Week Week 13 (22nd Aug 2011-28th Aug 2011)

Topic Topic 13: Financing International Trade Financing International Trade Payment Method: Prepayment, Letter of Credit, Bills of Exchange, Consignments, Open Accounts Trade Finance Method: Accounts Receivable, Factoring, Letter of Credit, Banker's Acceptance, Working Capital Financing, Forfaiting, Contertrade Revision

Tutorial 13 (Topic 12) Minimum 4 questions to be answered and will be discussed in tutorial class.

Reference Moffett 3rd Ed. (Chapter 20) Madura (Chapter 19)

Week 14 (29th Aug 2011-4th Aug 2011)

Tutorial 14 (Topic 13) Minimum 4 questions to be answered and will be discussed in tutorial class.

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UNIT PLAN UBFF3243 International Finance

This Unit Plan is

Prepared by: Moderated by Approved by:

Lecturer in charge Mr. Lim Tze Jian Date

Moderator Mr. Chong Tun Pin Date

Head of Department of Finance Encik Marlehan bin Mohamed Date

Note: The information provided in this Unit Plan is subject to change by the Lecturer. Students shall be notified in advance of any changes.

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